Business

ABU DHABI — Saudi Arabia’s oil chief on Sunday dismissed allegations that his kingdom conspired to bring down oil prices in order to harm other countries and told a summit of Arab energy leaders that he was confident the market would stabilise.

The kingdom, which is dependent on oil revenues, is able to weather lower oil prices due to large reserves built up over the years. Non-OPEC member Russia and other nations like Iraq, Iran and Venezuela need prices substantially above present levels to meet budget goals and want to drive prices up.

Saudi Arabia maintains it is opposed to cutting production because of fears its market share could erode.

“The best thing for everybody is to let the most efficient produce,” Saudi Petroleum Minister Ali Naimi said in the United Arab Emirates capital of Abu Dhabi. He was addressing the Arab Energy Conference, a gathering held every four years.

The price of US oil has dipped below $60 a barrel, its lowest in five years. Naimi said he was certain that the oil market would recover with the improvement of the global economy.

An OPEC meeting last month failed to agree on production cuts, mainly because of Saudi opposition to curb its own exports. OPEC controls about 40 per cent of the world oil market and Saudi Arabia is the cartel’s largest producer.

“A lack of cooperation by non-OPEC production nations, along with the spread of misinformation and speculator’s greed” have contributed to the drop in prices, Naimi added.

Some market speculators have suggested the kingdom is forcing lower prices to damage the economies of nations such as Russia and the Shiite powerhouse Iran, staunch backers of Syrian President Bashar Assad. Saudi Arabia backs the mainly Sunni rebels fighting to topple Assad.

Earlier this month, Iranian President Hassan Rouhani said the sharp fall in global oil prices was the result of “treachery”, a remark interpreted as a reference to Saudi Arabia.

“I want to say from this podium that talk about a Saudi conspiracy has no basis of accuracy at all and points to a misunderstanding,” Naimi said.

AMMAN — Overall Jordanian exports, including re-exports, during the first 10 months of 2014 reached JD4.9 billion marking an increase of 6.1 per cent compared with the same period in 2013, according to a foreign trade report released by the Department of Statistics (DoS) on Sunday. Domestic exports during the January-October period of 2014 increased by 8.1 per cent over the same period of last year to reach JD4.3 billion, the report e-mailed to The Jordan Times showed. Imports went up to JD13.4 billion, registering a 2.9 per cent increase in the first 10 months of 2014 compared with the same period of 2013. The DoS report also showed that the Kingdom’s trade deficit, the value imports exceeding those of exports, increased by 1.1 per cent during the January-October period of this year to JD8.4 billion at current prices. The DoS noted that the coverage ratio of total exports to imports has increased to 36.9 per cent from 35.8 per cent .

NEW DELHI — India's finance minister appealed to opposition parties Saturday to cooperate in passage of economic reform legislation, warning otherwise Asia's third largest economy "will miss the bus" again.

The traditionally fractious parliament has been stalled once more by political rows that have hindered efforts by the new rightwing government to enact reforms and revive the stuttering economy.

Stormy scenes in parliament under the previous left-leaning Congress government also hindered economic reform efforts. 

"The clear choice before us is either we reform or we miss the bus once again," Finance Minister Arun Jaitley told a top-level corporate audience in a speech in New Delhi.

"If the latter were to happen, a whole generation will not pardon us," Jaitley said.

He added there was a need for "a shared national vision" to get the country back to 9-10 per cent annual growth levels it enjoyed until a few years ago to lift hundreds of millions of Indians out of poverty.

India has been stuck in the longest spell of below 5 per cent growth in a quarter century, hit by high interest rates, an investment slowdown and flagging consumer confidence.

Economic growth in the last financial year to March 2014 was 4.7 per cent after falling to 4.5 per cent the previous year.

This year, the government hopes growth will accelerate to 5.5 per cent and next year "we have to first cross the 6 per cent mark", Jaitley said.

Growth downturns and uncertain investment landscapes in other parts of the world mean "investors are looking to come to India", Jaitley added.

But to capture this investment opportunity, India needs to slash red tape, liberalise the economy, speed decision making and become a more business friendly destination, analysts say.

"For the next decade we can have a full reform agenda on our table" if all sides get on board, Jaitley said.

Overseas investors have waited for years for India to overhaul its economy "and are confounded" by its failure.

"That is the challenge," he said and asked: "Can we allow this to continue?"

The minister's comments came a day after the government introduced in parliament tax changes which analysts hailed as a "game changer" that will cut the cost of doing business domestically and boost growth.

The government tabled the long-awaited goods-and-services tax (GST) harmonising varying state levies to create a single internal market.

The legislation will be debated in the next session of parliament and the government aims to implement the new tax in April 2016.

The government, led by Prime Minister Narendra Modi which was elected in May, is seeking to step up the pace of reforms after criticism from business it was not moving ahead swiftly enough.

Spelling out plans for the year ahead, Jaitley stressed that the government "is determined" to go ahead with liberalising the coal and insurance sectors to draw more investment.

He will present his first full budget in February.

The government is "absolutely clear about one fact — the [reform] course we've adopted is unalterable", he emphasised.

KUWAIT CITY — Gulf countries are bracing for tough times as vital oil revenues fall and after they missed a golden opportunity to diversify their economies in a decade of unprecedented windfalls, analysts say.

The six nations of the Gulf Cooperation Council (GCC) — Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE) — could soon start reeling from falling oil prices, which have dropped by half from their 2014 highs to around $60 a barrel. 

Pumping about 17.5 million barrels per day, GCC countries are forecast to lose at least half their oil revenues, or around $350 billion a year, at current price levels.

Oil revenues make up around 90 per cent of income for most GCC states and with prices now below budget forecasts, their governments are looking at certain deficits next year.

Spending cuts are sure to follow — and possibly even the region's first taxes — raising fears of public discontent and eventually an economic slowdown.

The oil price drop has also sent Gulf stock prices plummeting, wiping out billions of dollars of market value across the region and hurting major private firms like developer Emaar Properties and builder Arabtec Holding.

According to leading Kuwaiti economist Jassem Al Saadun, the heart of the problem is that Gulf states failed to seize on surging energy revenues to build up their economies outside the oil sector.

"Gulf states have missed an important opportunity to reform and build a real diversified economy," Saadun said. 

"Public spending has soared to new record highs and it was not for vital infrastructure projects to diversify the economy," he indicated.  "It was mostly for wages, salaries and subsidies... and handouts for buying political loyalty especially after the Arab Spring."

Reserves only 'temporary cushion' 

Economists are warning that even with the huge reserves many have built up, a prolonged drop in oil prices will hit Gulf states hard.

"The prevailing growth model for most oil-exporting countries has left them vulnerable to a sustained decline in oil prices," the International Monetary Fund said in a research bulletin last week headlined: "It is high time to diversify".

Ratings agency Standard & Poor's (S&P) is warning that an extended decline in oil prices will likely slow the Gulf economies, reducing spending on their massive infrastructure projects and hitting the private sector.

S&P has lowered its outlooks for Saudi Arabia, Oman and Bahrain, though it has maintained their ratings because of their impressive reserves.

The IMF has said that — barring Oman and Bahrain, which are already in deficit — GCC states will not be greatly affected in the short-term as they can tap into reserves estimated at $2.5 trillion.

But these funds, the IMF warned, will "only provide a temporary cushion".

In some parts of the region, the belt-tightening has already begun.

Regional powerhouse Saudi Arabia has insisted it will maintain its high spending levels by tapping into reserves.

But Kuwait has ordered major spending cuts and is considering lifting petrol and electricity subsidies.

In the UAE, Dubai has announced plans to raise electricity and water charges. Similar measures are expected by other countries.

'Options are
no longer easy' 

According to Moody's Ratings, Gulf countries are likely to start with cuts in spending on "non-strategic investment projects" but will eventually face tough choices.

"Slowing or even reversing the growth in current government spending, including subsidy reforms, will be more difficult as governments seek to meet social welfare demands," the agency said.

As oil revenues in Gulf states surged from about $100 billion in 2000 to $729 billion last year, public spending grew from about $150 billion to $547 billion, according to IMF figures.

But the spending focused mostly on items like wages and subsidies, not crucial capital investment.

"Current expenditure has surpassed capital spending by miles," indicated M.R. Raghu, head of research at Kuwait Financial Centre (MARKAZ).

Cutting that spending now is difficult as it means taking courageous decisions on wage and subsidy reforms, experts say. 

The Gulf states have adopted a generous cradle-to-grave welfare system with highly subsidised services and fuel and no taxation.

The World Bank has urged GCC states to start immediate cuts to energy subsidies, which cost them more than $160 billion annually, and Saadun said it was "inevitable" they would have to start introducing taxes.

Such moves would prove deeply unpopular. But Saadun said putting them off would eventually make more drastic efforts necessary, which could spark the kind of social unrest that has hit other countries in the region.

"Yes, these measures are politically sensitive, but the alternative is an Arab Spring in the Gulf. Options are no longer easy," he added.

AMMAN — The "investment window" will officially be launched in mid-April 2015, Jordan Investment Commission (JIC) President Montaser Okla said Thursday. 

At the monthly meeting with presidents and chief executive officers of companies that operate free, industrial and development zones, Okla said the new investment law has positioned JIC as the sole reference for current and future investors, whether they are Jordanians, Arabs or foreigners. 

According to Okla, the role of developers in attracting investments and marketing Jordan internationally has been upgraded, as JIC’s monitoring and organisational tasks, in terms of investment operations and serving investors, have become stronger after the endorsement of the investment law.

He indicated that JIC is currently preparing a draft agreement that gives developers wider authority, especially in municipal undertakings, licensing and registration.

Such a step would ensure that JIC attract more investments from countries, companies or even individuals, he said, stressing that attracting investments should not be restricted to government.

He added that JIC will cover the entire Kingdom through specialised employees with offices in the governorates, or in chambers of industry and commerce.

Nasser Shraideh, chairman of the Jordanian Free Zones Corporation, commended the commission’s role in making the Kingdom a comprehensive regional centre enjoying  stability and security, and attracting more investments that add value to the national economy.

AMMAN – Jordan's pharmaceutical industry has potential to grow further due to its capability to manufacture new products and market them globally, according to the European Bank for Reconstruction and Development (EBRD). 

Hanan Morsy, EBRD's lead economist for the SEMED region (Jordan, Egypt, Morocco and Tunisia), told The Jordan Times in a recent interview in Amman that a new study by the London-based bank found that the Kingdom's pharmaceutical sector has the capability to produce drugs and market them in international markets three times more than the rest of the 30 countries it covered in a report.

Morsy was in Amman along with other EBRD officials to launch the bank's annual Transition Report. This year's publication was entitled "Innovation in Transition". 

The private sector in Jordan, particularly the pharmaceutical and ICT, has the competence to help Jordan's economy achieve higher growth rates by adopting innovation and improving production capacities, she said. However, she noted that only 8 per cent of firms in Jordan can launch new products, compared to 11 per cent in remaining countries included in the report.

Obstacles hindering innovation, not only in Jordan but elsewhere, she added, are mainly related to uneasy access to finance, corruption and limited labour skills.

Access to finance for small- and medium-sized firms is a global issue, but in Jordan the budget deficit and the government's borrowing from local banks made it compete with the private sector, which negatively affected companies in obtain financing they need.

According the Morsy, the Transition Report 2014 includes detailed information on how firms innovate by introducing new products, new production processes, new ways of organising themselves and fresh approaches to marketing their products and services. 

The report also takes stock of firms’ investments in research and development, and provides new insights into how managerial practices influence a firm’s productivity.

A key idea put forward in this report is that, regardless of a country’s level of economic development or its progress along the transition path, individual firms can make a difference.

RIYADH — Saudi Arabia will continue massive public spending despite a 50 per cent drop in the price of oil, which provides the bulk of its revenue, the finance minister said Wednesday.

Ibrahim Bin Abdul Aziz Al Assaf commented after completing the 2015 budget, which will be presented to Cabinet "in the near future", the official Saudi Press Agency said.

Financial analysts expect the budget to be approved as early as Monday.

The kingdom is the largest economy in the Arab world, and the biggest crude producer in the Organisation of Petroleum Exporting Countries (OPEC)

Assaf said the budget comes during "challenging" global economic conditions but surpluses and reserves built over many years have given it "depth and a line of defence that come in handy in times of need".

He added that this policy will continue, enabling the government "to implement massive social projects" in health, education, social services and development as well as state security.

This spending, combined with private sector activity, is expected to bring positive economic growth, he continued, without giving a figure.

Riyadh-based Jadwa Investment said in a December 7 report that the government should be in a comfortable position to adjust to lower oil prices and avoid drastic spending cuts.

It highlighted "the strong sovereign balance sheet, with foreign reserves of more than 95 per cent of the gross domestic product (GDP) and a public debt of less than two per cent of national output".

Jadwa projected a fiscal deficit of 2.7 per cent in 2015.

It said it expected global growth to recover next year, helping to pull up crude prices to around $84 a barrel.

"We think the government will maintain elevated spending," Jadwa said, forecasting real GDP growth of 3.4 per cent in 2015.

British-based analysts at Capital Economics said a budget deficit "should be easily financed by issuing debt or drawing down savings. Overall, then, growth is unlikely to collapse as a result of lower oil prices".

Saudi Arabia had a nominal GDP of $748 billion (598 million euros) last year, and reported a budget surplus of around $55 billion.

The ruler of neighbouring Kuwait, Sheikh Sabah Al Ahmad Al Sabah, warned in October that falling oil prices were damaging his nation's economy.

LONDON — Members of the Organisation of Petroleum Exporting Countries (OPEC) which backed an output cut at the group's meeting last month are coming around to the view of Saudi Arabia that they need to focus on market share, further reducing the chance of any action to defend prices.

While Venezuela, which campaigned for output cuts in the run-up to the November 27 meeting, has continued to call for measures to prop up prices, other nations which usually back such action such as Iran and African members have been silent.

"The producers have not blinked. We are just watching and selling oil at whatever the price is," said a delegate from an OPEC country which in November had wanted an output cut.

This means there is greater unity behind the view of OPEC's core Gulf producers, which signalled this week they are prepared to wait as long as a year to see the market stabilise, despite a plunge in prices to below $60 a barrel, the lowest since 2009.

Oil's fall from this year's peak of $115 a barrel in June is particularly painful for countries such as Venezuela, Algeria and Iran, which need prices above $100 to balance their budgets, according to estimates by the International Monetary Fund (IMF) and other analysts.

OPEC was expected to address the problem in November by trimming production, but Gulf producers led by Saudi Arabia blocked calls from poorer members to reduce supplies, arguing the group needed to fight for market share.

A delegate from a second OPEC country which had backed a supply cut said any action to support prices would need to include non-OPEC Russia, which so far has shown no sign of backing down on its refusal to cut output.

"Despite the pain, we agree OPEC can't cut alone," the delegate said.

The first delegate said there was no need for OPEC to meet before its next scheduled gathering in June, as its most recent decision needed time to lead to a slowdown in competing supplies such as shale oil.

"The producers are trying to put the brakes on shale oil and that is going to happen sooner or later, and they are also stimulating the economy, and higher oil demand. That is going to continue," he indicated.

On Tuesday, the Kuwaiti oil minister said OPEC has no plans to intervene in the oil market to shore up sagging crude prices.

"At OPEC's meeting in November, we took two decisions," Ali Al Omair said at a lecture in Kuwait City. "The first was to keep the production ceiling unchanged and the second to hold the next meeting in June. So far, nothing has changed and there are no calls for holding an emergency meeting." 

He declined to answer a question on what price would force OPEC to step in to bolster the market.

"As of now, there are no plans. We will talk about it when it comes," the minister said in response to a question on whether OPEC would meet if prices drop to $40 a barrel.  

The Kuwaiti minister said the current slide in oil prices had "surpassed all forecasts", which initially predicted a slight drop in crude prices.

He noted that excess supplies in global markets had increased from 1.2 million barrels per day (bpd) when OPEC met last month to 1.8 million bpd now.

Oil prices were also under pressure because "many world markets are saturated" with oil.

Earlier on Tuesday, Omair said OPEC should stick by its decision to maintain production levels despite sliding prices. 

"There is no need for OPEC to change its decision" taken on November 27, the minister told reporters outside parliament.

"Kuwait believes the decision was correct and we should continue with it," he said, brushing aside calls for OPEC to take action.

The decision was not aimed at triggering "a price war", he added.

The minister hinted that oil prices could slide further.

"Undoubtedly many of the shale oil and sand oil companies are producing at a cost higher than current oil prices," Omair said. "It depends on the capability of these producers to continue pumping at such a low price." 

Omair said OPEC pumps around 30 per cent of global supplies and "we cannot reduce this level".

AMMAN — The Vocational Training Corporation (VTC) announced Tuesday in a press statement that the Pharmaceutical Centre of Excellence (PCOE) in Salt, in close collaboration with the Jordanian Association of Pharmaceutical Manufactures and the Employment-Technical and Vocational Education Training (ETVET) fund, is offering professional training, initially for a one-year technical diploma in manufacturing operations in production units. The training is enabled through the Employment-Technical Vocational Education and Training Reform Project funded by the European Union. The training is part of a broader strategy to contribute to demand driven education and training, in full partnership with the private sector. "Currently, 32 trainees, of whom 16 are women, are active learners as they have already secured assurances for gainful jobs in the thriving Jordanian pharmaceutical industry," the press release said. The EU project has supported the overall training programme development including  learning and training materials in a modular structure and integrated with 3 months of industry apprenticeship/internship.  The EU has also provided the VTC to set-up a library with valuable reference material. With financial assistance from ETVET fund, the training centre in Salt is fully refurbished and well equipped with a state-of-the-art manufacturing line.

AMMAN — Jordan Enterprise Development Corporation (JEDCO) and the Network of Jordanian Centres of Excellence on Tuesday signed JD145,000 in grant agreements to finance 13 start-up projects in Jerash, Irbid, Mafraq, Balqaa, Madaba and Tafileh governorates. In a statement to The Jordan Times, JEDCO said the grants will contribute to JD175,000 of investments, expected to create 26 job openings after an 18-month implementation period. Ministry of Industry, Trade and Supply Secretary General Maha Al Ali stressed in the statement the importance of local economic development, and the need to revisit all relevant laws.